CF Industries (NYSE:CF) -6.2% and Nutrien (NYSE:NTR) -4.8% in Thursday’s trading as Credit Suisse hits both fertilizer makers with Underperform ratings, believing farm economics and fertilizer profitability are near peak levels.
Peak conditions could continue longer than normal, and accelerated capacity will take time to bring online, but Credit Suisse analyst John Roberts expects valuation for CF Industries (CF) and Nutrien (NTR) will remain low until the cycle eventually bottoms.
New entrants into ammonia as a hydrogen carrier create both risks and opportunity depending on how fast blue or green hydrogen downstream investments ramp, Roberts says.
The analyst also notes that CF’s (CF) costs are linked to U.S. natural gas prices, and the company benefits when the oil-to-gas ratio increases, but “currently there appears to be more downside risk than upside opportunity.”
CF (CF) shares have come under selling pressure in recent weeks, and “the stage has been set for even more selling moving ahead,” JR Research writes in a bearish analysis published nearly a month ago on Seeking Alpha.